AES Corp. has rolled the alphabet tranches of a previously restructured credit into a $700 million term loan, taking advantage of the market environment to cinch a cheaper interest rate. "The key benefit [of tapping the loan market at this time] was the liquidity in the market and the lower interest rates," explained Ahmed Pasha, a manager of investor relations for AES. The company also completed a $250 million revolver. Both tranches are priced at LIBOR plus 4%, a sizeable cut from the company's former facility, which carried a spread of 61/2% over LIBOR across all tranches. Citigroup is the lead on the company's new deal and led the old credit.
AES' former facility was restructured last December to push out 2003 maturities until 2005. This facility comprised a $350 million revolver, a $500 million "A" term loan, a $427 million "B" piece and a $360 million "C" tranche. AES also had a $75 million letter of credit facility for its subsidiary, Drax. Since the December restructuring, AES has used a substantial portion of asset sale proceeds to pay down the credit facility. At the end of June there was only $80 million under the company's "A" loan, $217 million on its "B" piece and about $132 million on the "C" tranche, said Pasha. The Drax loan was also reduced to approximately $40 million.
The new facility increases AES' credit lines by about $135 million. The increase in the size of the credit along with cash will be used to repay the $150 million balance of AES New York Funding's secured equity-linked loan. The loan was issued by the intermediate holding company, AES NY Funding, but supported AES' investment in AES Eastern Energy, Pasha explained. The loan was set to expire in November 2004, carried a spread of LIBOR plus 41/2% and was backed by roughly 220 million of un-issued shares of AES Corp. Repaying the loan will free up that collateral, Pasha said.